Harding and Secretary, Department of Families, Community Services and Indigenous Affairs
[2007] AATA 1104
•13 February 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1104
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2006/696
GENERAL ADMINISTRATIVE DIVISION ) Re MICHELLE HARDING Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Dr EK Christie, Member Date13 February 2007
PlaceBrisbane
DecisionThe decision under review is set aside. The Tribunal decides to write off the debt due to the Commonwealth for a period of 12 months. At this time, Ms Harding is to prepare an updated Statement of Financial Circumstances and the respondent to consider whether to extend the write off period or to recover the debt.
1.
..........[Sgd]..........
EK Christie
Member
CATCHWORDS
SOCIAL SECURITY – family tax benefit – estimates of annual maintenance - overpayment – debt due to the Commonwealth - special circumstances – write off – decision set aside
Administrative Appeals Tribunal Act 1975 (Cth) s 37
A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) ss 71, 95, 101
A New Tax System (Family Assistance) Act 1999 (Cth) Schedule 1, Division 5 Part 1, Clauses 20, 20A
Social Security Act 1991 (Cth) s 1236Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re L and Secretary, Department of Social Security (1995) 21 AAR 412
Director-General of Social Services v Hales (1983) 47 ALR 281
Re Waller and Secretary, Department of Social Security (1985) 8 ALD 26WRITTEN REASONS FOR ORAL DECISION
6 March 2007 Dr EK Christie, Member 2. This is an application for review of the following decision (of the Social Security Appeals Tribunal (the “SSAT”) made on 11 September 2006 to raise and recover a family tax benefit debt (“FTB”) of $536.55 for the period 1 July 2005 to 30 June 2006.
3. The evidence before the Tribunal comprised the documents filed pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (the “T” Documents) [Exhibit 1] and the various exhibits lodged by the parties.
4. The applicant represented herself at the hearing. The respondent was represented by Mr Bob Hamilton, a Departmental Advocate.
Issues Before The Tribunal
5. The only issues for the Tribunal to decide were whether the family tax benefit debt paid during the relevant period 1 July 2005 to 30 June 2006 could be waived under the “special circumstances” provisions of the A New Tax System (Family Assistance) (Administration) Act 1999 (“the FAA Act”). Alternatively, whether the debt could be “written off” under the “write off” provision of this Act.
Facts
6. On the basis of the evidence before it the SSAT made the following Findings of Fact [T2, Folio 10]:
“(i)Ms Michelle Harding was paid family tax benefit during 2005/2006 based on assessments of maintenance of $449.98 (from 1 July 2005), $470.00 (from 6 September 2005), $743.82 (from 24 January 2006) and $743.80 (from 21 March 2006).
(ii)During 2005/2006 Ms Harding received a total of $5,777.58 in child support payments, the majority of which constituted arrears of maintenance.”
7. At the commencement of the hearing, Ms Harding agreed with both Findings of Fact made by the SSAT: she agreed that the child support payments received in 2005/2006 involved periodic payments over time.
Statutory Requirements And Case Law
8. The Tribunal has applied the following legal requirements and principles in its interpretation of the law in its consideration of the outcome for Ms Harding’s factual situation.
§ The Tribunal’s Decision Making Powers
9. There are a number of decisions possible in this application for review: whether the debt due to the Commonwealth can be waived for “special circumstances” or “written off”. Accordingly, the question for the determination of the Tribunal is whether the decision under review is the preferred one.
[see Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 at 68]
· Debts arising in respect of family assistance other than child care benefit and family tax benefit advance: section 71 FAA Act
10. If an amount has been paid to a person by way of family tax benefit (the assistance) in respect of a period or event and the person was not entitled to the assistance in respect of that period or event, the amount so paid is a debt due to the Commonwealth by the person (s 71(1) FAA Act).
11. Also, an overpayment arises if an amount (the received amount) has been paid to a person by way of assistance and the received amount is greater than the amount (the correct amount) of assistance that should have been paid to the person under the family assistance law; the difference between the received amount and the correct amount is a debt due to the Commonwealth by the person (s 71(2) FAA Act).
· The Special Circumstances Waiver Provision
12. Section 101 of the FAA Act provides for a debt due to the Commonwealth to be waived because of “special circumstances”:
“The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a) the debt did not result wholly or partly from the debtor or another person knowingly:
(i) making a false statement or a false representation; or
(ii) failing or omitting to comply with a provision of the family assistance law; and
(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) it is more appropriate to waive than to write off the debt or part of the debt.” [Tribunal emphasis].
13. For this section of the FAA Act to apply to Ms Harding’s factual situation, there must be “special circumstances” that enable the debt to be waived. Also, Ms Harding must not have “knowingly” made a false statement or false representation or “knowingly” failed to have complied with a provision of the Act. Both these requirements must be satisfied for Ms Harding to succeed under the “Waiver in Special Circumstances” provision of the Social Security Act 1991.
14. The common law meaning and application of the expression “special circumstances” has been considered by the Federal Court and the Tribunal on many occasions. The relevant legal principles that have emerged, over time, that have been applied to provide a meaning for “special circumstances” can be summarised as follows:-
(a)“An expression such as ‘special circumstances’ is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. …This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.” [Tribunal emphasis].
[See Re Beadle and Director-General of Social Security (1984) 6 ALD (at 3)]
(b)“…would require something to distinguish [the case to be decided] from others, to take it out of the usual or ordinary case…It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.” [Tribunal emphasis].
[See Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545]
· The Write Off Provision
15. Section 95 of the FAA Act provides for a debt due to the Commonwealth to be written off for a stated period or otherwise.
“(2) The Secretary may decide to write off a debt … if:
(a) the debt is irrecoverable at law; or
(b) the debtor has no capacity to repay the debt; or
(c) the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d it is not cost effective for the Commonwealth to take action to recover the debt.”
16. A former President of the Tribunal, Mathews J, has commented on the write-off provisions of s 1236 the Social Security Act 1991 – a similar provision to s 95 of the FAA Act in Re L and Secretary, Department of Social Security (1995) 21 AAR 412. Matthews J observed that the financial circumstances of the debtor and the prospect of the recovery of the debt will necessarily be the primary considerations in deciding whether to write off a debt. Mathews J summarised the position as follows (at 428):
“In summary, I consider that matters relating to the personal financial hardship of the individual are always relevant in any decision as to write-off under s 1236(1). Retrospective considerations may occasionally be relevant. The essential inquiry will always be whether recovery is a feasible proposition, bearing in mind the financial means and obligations of the individual concerned. Will recovery cause such personal hardship as to run contrary to the beneficial nature of the legislation? If an affirmative answer is reached to this question, then it would be appropriate to defer recovery in the manner contemplated by s 1236(1).” (Tribunal Emphasis).
17. In considering its discretion for write-off under the Social Security Act 1991, the Tribunal has also had regard to a number of factors referred to by the Federal Court in Director-General of Social Services v Hales (1983) 47 ALR 281. These factors were summarised by Senior Member Dwyer in Re Waller and Secretary, Department of Social Security (1985) 8 ALD 26 at 42 as follows:
“(a)the fact that the applicant has received public moneys to which she was not entitled;
(b)the way in which the overpayment arose, whether as a result of innocent mistake or fraud;
(c)the financial circumstances of the defendant;
(d)the prospect of recovery;
(e)whether a compromise is offered;
(f)whether recovery should be delayed if there is a prospect that the circumstances of the person who received the overpayment may improve; and
(g)compassionate considerations and the fact that the Act is social welfare legislation and any financial hardship which may result from an action for recovery.”
18. I have considered the question of write-off under these principles as they are a relevant consideration under a similar provision for write-off under the Social Security Act 1991 and the FAA Act.
Findings of fact and Consideration of the Issues
19. The first issue to consider is how did the FTB overpayment problem in 2005/06 arise?
20. The Tribunal accepts Ms Harding’s evidence that there is a long history (over five years) of the father of Ms Harding’s children not providing Ms Harding with periodic maintenance payments each year, that he was required to pay by the Child Support Agency. As a result, he paid maintenance arrears from the 2003/2004 and 2004/2005 financial years, which he had failed to pay during these financial years, to Ms Harding in the 2005/2006 financial year. These arrears were paid between November 2005 and April 2006.
21. The maintenance income used to calculate Ms Harding’s FTB entitlements is based on the total amount of maintenance income received during the entire financial year (T3, folio 21). The child support payment arrears paid to Ms Harding in 2005/2006 by the father of her two children is maintenance income. Schedule 1 of the FA Act does not enable maintenance income arrears from previous years to be apportioned to any other year other than the financial year they were received by Ms Harding. As a result in Ms Harding’s case, the maintenance income arrears were received by her in 2005/2006.
22. It is the arrears of maintenance income received in 2005/2006 by Ms Harding from the father of her two children that has resulted in Ms Harding underestimating her annual maintenance income in 2005/2006. As a result, she has been overpaid FTB entitlements of $536.55 in 2005/2006.
23. This amount is a debt due to the Commonwealth which can be recovered.
24. In making this finding, I conclude that there has been no attempt, whatsoever, by Ms Harding to deceive Centrelink or to act fraudulently. I find Ms Harding to be a witness of truth who has acted honestly with Centrelink against a background of difficulty understanding the operation of complex FTB legislation in her factual situation - as well as having a long-standing problem, for over five years, of not receiving maintenance income from the father of her two children in the appropriate financial year.
25. In terms of whether the debt could be waived for “special circumstances”, I find the following facts to be relevant (T27, folio 93):
(a)FTB maintenance arrears must be assessed in the financial year in which they are received;
(b)At the end of each financial year a FTB reconciliation is undertaken on which the estimated maintenance income for that financial year is compared with the actual child support payments received; and
(c)In 2003/2004 and 2004/2005, the reconciliation revealed that Ms Harding’s estimated maintenance income was below the maintenance income free area. As a result of the reconciliation, she received the maximum FTB entitlement. In 2003/2004, Ms Harding was paid $1,204.14 after reconciliation. In 2004/2005, she was paid $1,376.63 after reconciliation.
26. It is only in 2005/2006 that the reconciliation process identified an over-estimate of maintenance income because of the arrears in maintenance being paid to Ms Harding, from previous years, by the father of her two children.
27. Because of the operation of a FTB recalculation at the end of each financial year which identified both (a) under-estimates of maintenance income resulting in Centrelink then paying Ms Harding her correct FTB entitlements for 2003/2004 and 2004/2005, as well as (b) under-estimates of maintenance income in 2005/2006 resulting in an overpayment of FTB entitlements, I conclude that there are no “special circumstances” to justify waiver of the debt.
28. That is, the above facts do not reveal any facts that are “out of the ordinary”, “exceptional” or “unusual” that will result in a different outcome for any other person receiving FTB entitlements.
29. However, there is a basis for write off of the debt when due regard is given to the financial needs and obligations of Ms Harding and the question whether recovery would cause such personal hardship to Ms Harding as to run contrary to the beneficial nature of the legislation.
30. I make the following findings of fact in relation to the “Hales factors”:
(a)Ms Harding has received public moneys to which she was not entitled. However, there has been no dishonesty on her part or any attempt to defraud Centrelink;
(b)The overpayment has arisen from an innocent mistake by Ms Harding in estimating her annual maintenance income. The source of the error is that the father of her two children has had a long history of failing to pay maintenance income on a regular, periodic basis each year. The problem for Ms Harding was that substantial sums of maintenance income arrears from previous years were paid to her between November 2005 to April 2006, causing her annual estimates of maintenance income to be incorrect for that financial year.
(c)Ms Harding filed a Statement of Financial Circumstances on 24 November 2006. In this statement she has inserted amounts for Gross Pay and Rent based on values provided to her following her direct query to Centrelink.
(i)Her Gross Pay (before tax and other deductions) is around $458 per week plus child support of $180 per week (when and if paid by the father of her two children). Her Estimated Expenses are around $444 per week. These expenses do not include an amount for the current recovery of the overpayment ($30 per week).
(ii)The respondent has relied on figures for child support payments paid by the father of Ms Harding’s two children for the six week period January – February 2006 and submits that Gross Income is around $475 per week.
(iii)Based on the fact that the father of her two children has a long history of failing to pay child support at the correct time each year – and appears to be continuing to do so in 2006/2007 [see para (b))], I accept Ms Harding’s estimates at this stage.
(iv)A comparison between income and expenditure indicates a financial situation in which there is very little margin for a sole parent of two children. The expenditure indicates a frugal existence in which there is little savings (no more than $10 in a bank account) and no reserves for any unforeseen large capital outlays e.g. medication, children’s illness, motor vehicle repairs, essential necessaries of life and essential domestic repairs.
(d)At this stage, the prospects of recovery could only be regarded as very limited. Ms Harding has office and administrative skills and has sought and undertaken part-time work (including evenings on a number of occasions), but ongoing medical problems with her youngest child (now aged 5) has resulted in her being unable to continue working because of the need to care for the demands imposed by the illness of her youngest child.
(e)The recovery of the debt should be delayed until such time as Ms Harding believes that she can effectively enter the workforce and, at the same time, be sure that her two children do not create any obstacle for her in any continuing demands arising from illness necessitating her care.
(f)A review of the above findings indicates compassionate considerations exist in addition to financial hardship.
31. In finding that the debt be written off it is for a defined period of 12 months. This is to enable a clearer picture of income and expenditure to be derived – including inconsistency of periodic Child Support Agency maintenance payments by the father of Ms Harding’s two children, the general health and well being of Ms Harding’s two children and the personal and family situation and the likelihood of a return to work by Ms Harding.
32. For all of the above reasons the decision under review is set aside. The Tribunal decides to write off the debt due to the Commonwealth for a period of 12 months. At this time, Ms Harding is to prepare an updated Statement of Financial circumstances and the respondent to consider whether to extend write off for a further period or to recover the debt.
I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of Dr EK Christie, Member
Signed: Fiona Kamst
Legal Research Officer
Date/s of Hearing 13 February 2007
Date of Decision 13 February 2007
Date of Written Reasons 6 March 2007
The Applicant was self represented
For the Respondent Mr B Hamilton, Departmental Advocate
1
2
0